Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2023

Viscount Stansgate Excerpts

Tuesday 23rd January 2024 Grand Committee

[Baroness Vere of Norbiton (Con)]

Once again, I am grateful to noble Lords for sharing their thoughts in this short debate.

As ever, the noble Lord, Lord Jones, rightly held the Executive to account. I always appreciate his questions. He asked how many small businesses there are. There are hundreds of thousands of them. I can tell the noble Lord that 90% of properties come under the small business multiplier, so only 10% pay at the standard rate; of course, that covers hundreds of thousands of properties, some of which may be used by a single business. We must recognise that the small business multiplier is really important because it covers most properties. As the noble Lord, Lord Shipley, pointed out, it was frozen at the Autumn Statement because we recognise and share his concerns about the impact of business rates on our high streets, which we want to keep as vibrant as possible.

The noble Lord, Lord Shipley, is right that this is a tax cut. Sadly, it is quite limited, but, nevertheless, we will take tax cuts wherever we can find them. As I mentioned in my opening remarks, it amounts to around £5 million and goes to charities. Charities get other reliefs as well, which is why the impact is probably smaller than one might otherwise think.

Monitoring and reviewing business rates is a really important area. The Valuation Office Agency is responsible for valuing non-domestic property for business rates purposes. As I mentioned, we have decided to reduce the revaluation period from five years to three years to make it a bit more flexible and agile. The agency is required by law to compile and maintain accurate rating lists for non-domestic properties in England; it must do this impartially and independently of central government. It follows international valuation standards and the RICS mandatory guidance on the appropriate method of valuation. Of course, the VOA remains happy to talk to ratepayers to ensure that it gets the number for the rateable value right.

It is also important to recognise that the VOA is undergoing a period of transformation. There are some opportunities to digitise business rates. There is also a positive opportunity to link business rates to the HMRC system, to make it much easier and so that there is better targeting and understanding of how the business rates system works with the tax data from businesses themselves. This reform programme is called the digitalisation of business rates, and it will be a major step forward in modernising the entire system.

The noble Lord, Lord Shipley, went on to ask what small businesses think of this and whether we have heard from them. I am pleased to be able to tell him that there was the 2023 business rates review consultation and the technical consultation. We heard from the Federation of Small Businesses and many other representative groups in those consultations; they provided us with valuable feedback on how we can make the business rates system more productive.

The noble Lord, Lord Jones, mentioned the issue of some in local government feeling the pinch at the moment. The provisional local government finance settlement for 2024-25 has made an additional increase of 6.5% in councils’ core spending power. A consultation with the sector closed on 15 January and we are considering the responses. The final settlement will be confirmed in early February. The Department for Levelling Up, Housing and Communities always stands ready to speak to any council that has concerns about its ability to manage its finances or faces pressures that it has not planned for. We are aware that a small number of local authorities have recently suffered financial distress because of issues specific to them. As I say, we are keen to work with local authorities to ensure that they continue to deliver services for the public.

The noble Lord, Lord Shipley, said that business rates are too high, although he gave credit to the Government, noting that we held the small business multiplier for 2024-25 in the Autumn Statement. That is a positive thing. There is an enormous number of reliefs available for different types of businesses— I was briefed on this—and it is worth making sure that businesses are aware of them. Noble Lords will be aware of the reliefs that we have been able to extend for hospitality, to ensure that our high streets remain vibrant places to go to and socialise. Indeed, there are plenty of others, such as the improvement relief. I think it is possibly quite complicated, but necessarily so, because it targets money to where we need it most.

The noble Lord, Lord Livermore, asked about unoccupied properties. Local authorities are responsible for administering business rates at a local level, and they would determine the occupation of the property. However, if there is any more information or guidance around that that I can provide him with, I will certainly write to him with an update on business rate evasion and avoidance.

Motion agreed.

[The Deputy Chairman of Committees (Viscount Stansgate) (Lab)]

It may be for the convenience of the Grand Committee that we adjourn now, as there is about to be a vote in the Chamber, and reconvene 10 minutes from the moment the Division Bells begin.